Sun Coverage

The $1.9 billion Palazzo, at left, opened in December 2007, boasting 3,068 rooms. The resort is shown here in February 2008.

There's little to glean about the success of CityCenter from the first earnings results issued by the major casino companies since the opening of MGM Mirage's shiny new Strip addition.

The fourth-quarter reports issued by Las Vegas Sands Wednesday and MGM Mirage Thursday include results through Dec. 31 -- just two weeks' worth of revenue relating to Aria, which opened its doors Dec. 16, and just more than three from Vdara and Mandarin Oriental.

But one thing is certain from the remarks by company executives and gaming analysts' reads: Competition is alive and well and is likely to get even more intense on the Strip in the months ahead.

Revenue continues to be down for Las Vegas Sands, operators of the Venetian and the Palazzo, and MGM Mirage in Las Vegas. Low room rates, the bane of Strip casinos since the economy tanked and the delight of thrifty tourists looking for a deal are at the root of the blame for Las Vegas Sands' and MGM Mirage's local financial hits.

"The problem in Las Vegas continues to be room rates," Las Vegas Sands Chairman Sheldon Adelson said in his conference call.

But Sands salvaged its quarter with stellar results in Asia. Company spokesman Ron Reese said there's no doubt that Las Vegas Sands today is more of an Asian company that happens to have some assets in the United States than a U.S. company making its mark in Macau and Singapore.

Adelson continues to be proud of his convention model -- recruiting conventions, conferences and trade shows to his massive convention facilities so that they'll stay in Venetian beds, eat Venetian food and be entertained by Venetian shows and, presumably, gamble on Venetian slot machines.

"While the Las Vegas market may not shine as brightly, our conventions business remains compelling and will enable us" to achieve the company's financial goals, Adelson said.

"One of our competitors has been boasting about taking business from us," Adelson said in his conference call. "Actually, we have taken more business from them than they have from us."

After opening that door, Adelson got specific, calling out MGM Mirage as the convention raider. But Adelson said his company got the last laugh when a major corporate meeting -- he wouldn't say what it was -- defected to Aria, but returned to the Venetian on a three-year contract after being at Aria just this year.

He also hinted that one of the Venetian's upcoming new conferences involves a federal government organization, but he wouldn't say what it is.

MGM Mirage, meanwhile, is regaining its footing in the convention world and Aria's new convention center may be the most technologically advanced in the industry.

This year, the company has more than tripled the number of room nights from convention bookings it had in all of 2008. MGM Mirage CEO Jim Murren said about half of the convention bookings MGM Mirage has nailed down are new business to his company and about half of that is business new to Las Vegas. He acknowledged that the company has lost some business to Wynn Las Vegas and Las Vegas Sands, but it has won some too, and if you were to talk to meeting planners of corporate America, "you'll come to the conclusion we have that we're winning more business than we're losing."

But attracting business to Aria has come at a price with the company admitting that its deep discounts have not helped the bottom line. Las Vegas Sands said it is aggressively trying to keep room rates from sliding. That shows in simple consumer vacation packaging, which parallel convention room rates.

A recent search on the pricing of a three-night stay on the first weekend of March Madness, March 19-22, on SouthwestVacations.com, Southwest Airlines' tour-packaging partner, listed the three-night stay and a round trip to Las Vegas from Denver would cost $837.17 at Aria, $875.56 at Signature at MGM Grand and $800.02 at Wynn Las Vegas. A comparable trip using the Venetian or Palazzo costs $1,224.96 with the Four Seasons holding the high end at $1,234.47.

So which strategy is better, discounting to draw crowds and increasing volume or staying the course on room rates and hoping the market that can afford to pay will show up?

Anthony Curtis, who publishes the Las Vegas Advisor, a newsletter about casino deals and promotions, said the latter alternative could be deadly to casinos.

"It's not a strong move," Curtis said. "These operators have got to look reality in the face. They've got to say, 'I need to have more bodies in my place.'"

Curtis said it's not everyone's nature to buy high-class food and entertainment and that those who are discounting rates while cutting costs are holding their own.

And, he praised the Venetian and the Palazzo for having some of the best bundling in town -- a discount at a spa, restaurant or show as part of a room package.

"A lot of these companies are saying, 'The reason we're hurt so bad is that we took such a haircut on the room rates,'" Curtis said. "I'd rather have the bodies and make it up elsewhere."

Randall A. Fine, managing director of The Fine Point Group, a gaming consultant, said there simply are too many high-end rooms on the Strip, especially considering the shorter supply of seats flying into McCarran International Airport.

With air traffic down and drive-in traffic up, the look of the average Las Vegas tourist is changing, and that visitor is going to be more likely to return a second or third time if there's a discount rate.

The Venetian and the Palazzo can survive without discounting because Las Vegas Sands is so heavily invested in Macau and Singapore.

In its earnings call, Sands indicated it would be focused this and next quarter on Singapore, where it will open the region's second integrated resort. Adelson indicated an opening date would be unveiled next week. He also said the company's momentum in Macau would enable it to resume construction of a 13.3-million-square-foot development with 6,400 rooms under the Shangri-La, Traders, Sheraton, Sheraton Towers and St. Regis brands.

Room volume helps drive convention traffic and convention traffic will lead to more mass-market gaming in Macau, Adelson said.

Although MGM Mirage is discounting rooms now, Murren indicated that won't last long as Aria's convention calendar is ramping up. By April, he said, the company would be able to start bumping up room rates for conventions and, most likely, leisure consumer hotel rates as well. Murren indicated convention hotel room rates generally are about $60 more per night than leisure rates.

MGM Mirage executives are projecting that revenue per room night "will turn positive" -- that is, it will be ahead of what it was a year ago -- by April. Every month after that is projected to be higher than the same month a year earlier.

What that means for deal-seeking visitors is that if you want to stay at CityCenter at a bargain price, you probably need to book before April.